IOU: Indian Outsourcer Uncertainty

The Associated Chambers of Commerce and Industry of India warned that many Indian companies in sectors including technology and financial services are likely to cut one quarter or more of their employees in coming weeks. Other Indian executives expressed their views of the Indian economy and employment as well.

Focal Points:

• The chamber's president stated a number of large companies have already drawn up "conclusive plans" to cut their work forces by 25 to 30 percent. This will be a stunning reversal for India's services-based industries, which have been the fastest-growing in recent years. In a culture where a secure career is often a prerequisite to marriage and the idea of a job for life has not disappeared, any layoffs are politically and socially sensitive. There have been few mass layoffs so far but many are expected after the Indian holidays. Satyam Computer Services Ltd., the fourth largest outsourcer in India by sales, shelved plans to hire 15,000 Indian graduates this year. Instead, it said it will make 9,000 offers.
• Nandan Nilekani, co-chairman of Infosys Technologies Ltd. claims there will be no pink slips in the Indian information technology industry as the fundamentals of the sector are strong. He does not see job cuts but does see employment growth slowing. Indian executives expressed the short-term outlook is somewhat cloudy but that the economy has the resilience to sustain its growth momentum in the medium-term.
• India's top three software companies are still resolved to hire fresh engineering graduates for the fiscal year 2009-10 even in the midst of the economic slowdown. Wipro Ltd. sees the slowdown as an opportunity to “spring clean” its operations and prepare for the next round of growth. Nonetheless, the company is lowering the number of campus hires to 8,000 from 14,000. Tata Consultancy Services (TCS), on the other hand, has made almost 25,000 technical campus offers for 2009-10, a 13 percent increase over its hiring of 22,000 for the current fiscal. Infosys will be making around 20,000 offers, an 18 percent increase. Around 40 percent of staff at the top three IT companies have less than three years experience.

Experton Group believes the demand for outsourcing may be flat to down in the upcoming year and Indian outsourcing firms will be impacted by the slowdown. The attrition rate at these firms remains in double digits so the hiring has to be viewed in light of ongoing losses and skills. TCS is the only one of the top three that is betting on not experiencing a slacking of demand. IT executives should be concerned about the quality of staff and skills available to their projects and the turnover at Indian outsourcers, and should stay on top of their outsourced efforts so that slippages do not get out of control.